Financial Institutions Overview

These flashcards cover the definitions, functions, and examples of financial institutions, particularly focusing on commercial and central banks.

What are financial institutions?

Institutions that deal with financial transactions like accepting deposits, granting loans, and investing in securities.

What are the two major groups of financial institutions?

Banking financial institutions and Non-banking financial institutions.

What are examples of banking financial institutions?

Commercial banks, Central banks, Merchant banks, Development banks, Savings banks.

Define commercial banks.

Financial institutions that accept deposits from the public for safekeeping and give out loans to make profit.

What is the primary function of commercial banks?

To accept deposits and provide loans to individuals and organizations.

Name two functions of commercial banks.

1. Acceptance of deposits 2. Lending of money (loans and overdrafts).

What does a central bank do?

It controls other financial institutions and formulates monetary policy for a country.

List one function of the central bank.

Controls foreign exchange and enforces foreign exchange rates.

What is meant by "lender of last resort" in relation to central banks?

It provides loans to commercial banks during unusual cash demands from customers.

How does the central bank assist the government financially?

By collecting revenues, making payments, and advising on monetary matters.